HZN - Earnings call transcript Q1 2019

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Operator

Good morning, everyone and welcome to Horizon Global's First Quarter 2019 Conference Call. My name is Brandy, and I'll be your operator for today's call. All participants will be in listen-only mode until we reach the question-and-answer session of the conference call. This call is rerecorded at the request of Horizon Global. If anyone has any objections you may disconnect at any time. to conference like to now would turn over the Ms. I and Director for of Cowdin, Investor Corporate Christi Communications Relations Horizon Global. Ms. Cowdin proceed. you may

Christi Cowdin

Brandy. and everyone XXXX webcast. Good our you, quarter and conference welcome first call Thank to morning

Investor many the as XXXX Horizon and section Earlier results. is of Relations this The On and we in announced Financial on our Global; today release Bizon, Barry are website President new call our our well CEO at Chief morning, Steele, the sites Officer. as Carl first of available quarter horizonglobal.com.

from like slide two, Chief about presentation remind available filings and to appendices which in disclosures. uncertainties materially statements non-GAAP Turning of the Commission. statements Exchange presentation Today's in Officer in reconciled all quarterly XX-Q like said, future and company's at Securities release Form to differ could I to to Carl Relations and to are reports over today's of forward-looking would Bizon. with and We've Global's most includes will Form disclosures press I'd constitute turn and quarterly GAAP which horizonglobal.com. the in also on these disclosures results are actual for views to the These Executive Risk recent the both Investor other of our President to website our subject our you our our now These statements. in section described Carl? With that being the call and are include that forward-looking uncertainties XX-K, on performance, and risks Factors other the report presentation risks Horizon statements. that annual cause

Carl Bizon

full review operations the quarter all our to Thank update This we you, provide the first on good for morning, results including for throughout you driver Christi, call efforts second will on our an our selling and results today. a XXXX. ongoing I'll of demands morning third will key be the meet of Americas quarters, year. and the to the the season of the in our which prime

in cover We the the the will outlook for also progress remainder initiatives global during our our of XXXX. business Europe-Africa and improvement against business

discuss global Additionally, team, of our management our our operations. across our alignment board all team Horizon our members we'll and of of

intently quality focused products value. service by towing our levels Our leading shareholder and and results drive team trailering providing achieving on that industry and is customers improving financial the will demanded

of remained class in relentlessly past a we behind This that, questions of is call Barry channels us the operational driving one end products the comments, forward strategic focused our you commitment performance team users year over my most and distribution. Following and across business our team on we covering through After of move it all familiar will improvement from to to both the our that we as is phase growth. Throughout outlines X the Slide have of open we to take everything delivering current financial as do, customers analysts. efforts and towards our our the next has best our today will position. business vision. business

entered We on XXXX X. with slide momentum fronts. to Turning positive several

recent some achieved Let strategic quarter. by in first of outlining the me the start accomplishments we

fund plan results compliance its to that well As achieving additional liquidity in after completed earnings. provide existing capital to we our a stage back announced revenue in business successfully amendments we our loan call as most term to arrangements we earnings regain listing standards. Stock these Exchange lien discussed March, had debt Shortly during and our accepted and second as adding set for recent our with improvement New initiatives York to improved continued securing initiatives the the

of Board board with composition wealth directors progress are the In board a early six our the change submitted. April directors; we eight to financial company to new our the NYSE proactively of Horizon our goals. addition independent demonstrate retiring towards significant The directors; achievement independent. We and remaining announced bring whom three to Directors we is our are working of long-term to overall plan and four of members with a the expertise operational supporting that brings nine essential to turnaround and of

for with year and Our shareholder to increase the and board time board subject annual at to action structure now meeting. wasted existing met taking in voted approval. in director mid-April accelerating will to declassified the no governance and initiatives reelection The stand every alignment Each shareholders.

Some highlighting equity But to an shift are of with Board compensation program, change our own significant already shareholders. directors shareholders. its further alignment based new to primarily the elected to

closely Board Our for improvement progress working value on efforts our and shareholders. to drive team their operational deliver is with fully engaged and our

QX expected, softer our than profit demonstrated performance was Our but operating improvement. revenue

revenue impacted to our primarily total sales. lower prior was in segment Our adversely have QX to due modestly which factors year, compared Americas' two

And expected past City we first to the QX. and positive year. prior The this and the to our this first second of distribution was light the in and distribution trends With compared to quarter, in distribution this performed needs Kansas in center due our main to season well hub was year's the a Americas, continue a of meeting servicing repeated challenging orders due happened regional due customers, centers not is demand weather demand ready for spring year. In start year. last comp pull-forward was our the but QX adverse that to see

enabling new ability distribution we Currently automated basis, Kansas to operating Additionally, system within customer to system and a on the enhanced labor in implemented retrieval service our orders. will stock team limited improve the this City. new provide efficiency expect the the center further team productivity

team team's to in the Chief to pivotal the in in season in for Americas' created next and the achieve This made Americas. the meet role summer the ability quarters. improvement a that confident Americas region be XXXX a me plan seasonal in our Operating newly Americas' with partner profitability demand the selling our of the over beyond. we are Officer, strengthen and to will will team position, peak leadership We this Notably, our two announcement a with move

second during and Americas' that through forward meaningful and The address working the customers. price appropriate to COO commodity increases an now the value changes the fully and tariff new team. the look provide in continue and quarter Our to cost related Americas' immediate we contribution are team reflect will business we begin instituted to our

with on the expenses. pricing team reducing of costs to SG&A in begin reap improved benefits focused Beyond we the as we operating reorganization XXXX, completed the

team review line our results Our operations. make SG&A we team in way, to continued reduced Americas business in aspect within our costs With leading in an segment improvements the quarter. responsibly and the our bottom Europe-Africa efforts in the turning reducing around of the to towards operations. across our In every progress continues the post

level making discuss operations, we demands losing supply possible and a shifted resources and key overall in performance operational the to is improved distribution premium have maintaining on enhance sight to of further our meet this concentrating We moment. production, daily while sure Overall, goals and production the needed personnel the has deadlines. greater bigger meeting of production team to slide is the the not just next aligning local and incurred that a at in But the picture, on team and Production facilities for customers. will the operations details, chain while of detail our improved operating reduce focus suppliers driving wherever productivity team logistics and cost have has freight cost. reduce on to

with year, be prior the a quarter team efficiency. the Asia-Pacific quarter the to significant continued company's the results. operating continued able our softer sales to on to compared standout improvement generate at to operating for focus contributor profit, first Despite in slightly peak was

continues or region. that exceed Asia-Pacific for to expectations our meet performance

are to to these to Europe-Africa. an across of region. come our changes From six consolidated operations the initiatives business still goal and overall efficiency long of view business many have of a those progress. improve logistics to changes productivity toward sourcing go of operational will improving far This be implemented short our provide and overall long The our initiatives, provides so Turning is -- of Europe-Africa. targeting business to in we our way the initiatives greatly profitability long-term and a specific improvements broader improvement we extension to that improvement. series to procurement productivity streamlining expected view and both Slide both for we

We local have cost savings supplied efficiency providers to where sources achieved. shifted and could be

possible. logistics economic arrive at have cost wherever global deliver looking We we overall cost Throughout supplies considered decisions process, to addressed and of pricing. this performance. the transportation and to simply not Ultimately the optimal component shifted to must be the at improved are lower impact, business cost and

to the the expected making certainly are is region. recent than we slower While solid our improved building cost due business challenges in base progress,

which demand, during the XXXX were the season availability to in upcoming some We inadequate help build from To year's have make the regain prepared our on this the due year into season. the Europe-Africa we help for expected and will market for new business development sales share stock to selling position customer long-term introduced customers XXXX offerings with in later aftermarket aftermarket continue product working will for of us that lost inventory prime the should actively season. growth, and are gains be that help aftermarket momentum next

we customers and of are in we the operations on segment and with program offerings for delivering challenges the business ongoing high overcome The business profitable business unwind the more improvement have the be we we reducing consistently will our towards fundamentally while the focus have customers stronger amongst surrounds our Europe-Africa though and past and it current margin long-term. across European quality our product region. Europe confident as create and working in unprofitable our of will a improvement innovative accomplish far that margin our some this than impact these products the growth Ultimately, with promises multiyear all process. services providing products shifting recent higher in the reputational profile So within by we these unnecessary quarter, acquired that in programs We've to presence we to when simplify initiatives complexity our are overarching initiatives, and efforts is progress lower made challenges in our deserve. an that actively a realized theme -- created

with we channels region. that slide the take the will most we fixable on to execute potential new the remain to of If on business also conditions initiatives building we the X, initiatives. the actions continues through results. right and evolve The last in said ultimately to financials identifying the we progress processes production segment as team business Europe-Africa us convinced prioritize programs, in potential on quarter, profitable greatest while continue as As challenges improvement impact turn team our Barry are the and

Barry Steele

Carl. you, Thank

consolidated please company's of quarter. for mentioned turn the the to results XXXX Carl As for first slide review X

charges our improved improved offset slower non-recurring our higher channels, and year. which with Our volumes sales are e-commerce are still year, quarter. selling year that first sales basis prime of better primarily earnings we the but in industrial was results, Net allowances important X.X%. X.X% start by than to historically to the OEM recurring quarters, and in the posted returns by prior quarter The to sales unfavorable our consolidated net during Revenue the results second to has were to for the XXXX, and prices this increased quarters company. translation. results on significant were prior and constant a much sales and year-to-date the below which adjusted during increases an and revenue currency due expectations first aftermarket This On our during most compared season quarter. lower a impacted better only basis, along third decline were currency due lower for the modestly point expect performance reduction see selling on the

expenses items million comprised recall quarter product our in first quarter product special process loss to million included XXXX million liability XXXX term the totaling $X.X charge associated a customer sector. associated of totaling -- and and special and compared an to XXXX. in Europe-Africa our with adjustment our items million to special during $X.X primarily $X operating of a ABL the fees Our amend loans of $XX.X with $X.X items as million of first are

totaling and first mainly administrative million the and year, XXXX $X.X higher customer of activities million. was operating loss an general volumes, $XX.X and pricing of penalties and special for employee costs operating than center for during to $X.X offset of adjusted these $X.X increased the totaling million items adjusted costs. million expenses, segments items, and million partially reduced selling related Europe-Africa. in the the driven the improvement and year. mainly and normal by in $X.X Americas higher quarter consisted impairment by severance the prior This and compared commodity which to Accounting charges was Europe-Africa sales goodwill customer Distribution inefficiency higher reorganization special freight restructuring loss $X.X were prior even During million fines

segments, Americas' general decreases doubled the $X and net aftermarket million at improvement increased led quarter and to e-commerce sales OEM during a sales, sales during price lower increases the in offset A being adjusted included $XXX,XXX or of which and adjusted by during sales offset unit under retail of operating $X.X and an to turn mostly XXXX. the lower net first let's quarter Cold selling, in volumes segment higher in volume driven wet flat industrial XX.X% X input This to by sales expenses. small totaled represented million segment compared review reported sales sales. year quarter, $X.X to respectively. declined was as XX% offset operating an slide prior and changes improvement just in Americas' net mix increases administrative the sales $X.X whereas level. increase by of to same were price by million, an period X.X% the net the respectively. channel performance costs year-over-year net in the North nearly These quarter. The The in The totaled XXXX, loss of compared to Now $XXX,XXX lower which offset weather to returns performance higher net returns. sales for million and compared intended increases the by segment reduction to which XXXX. was lower that mainly loss was due price America, higher important Net both and

This point an which operating impacted this mix this for While both in cost progress gross expectations -- right this was the in margin. and fixed -- current the the in revenue, – the for mainly the and current coverage product represents the of impacted lower top-line, while driven shortfall year. direction, short than our results progress by margin which fall anticipated unfavorable

XXXX. mentioned As expected line which reduction a measures, during of to to contribute bottom implemented $X for we the we our have additional are million last number cost call,

the revenue We channel a were due segment unfavorably remainder this year. the expect impact by to This X.X%. by positive for was Like driven mainly offset Americas' in net translation. decrease On the during constant sales, the flow currency sales. Europe-Africa currency which margin. increase of sales net to this lower was through basis, OEM grew in higher The mix unit segment, partially volumes, aftermarket channel shift impacted gross by

also slightly adjusted general However, loss quarter was first first Consequently, mostly compared during profit This lower selling of reported the The performance revenue. year OEM attributable offset currency to adjusted an to compared partly lower by small which resulting during of our and below was the a increase restructuring lower margin $XX,XXX for XXXX, reported Asia-Pacific X.X%, currency activities expectations operating prior decrease. was to $XXX,XXX initiated from the an administrative as sales operating the higher was result The totaling quarter. we quarter, offset Again, XXXX net slightly gross quarter. the adjusted as for the revenue segment aftermarket during expenses, quarter. translation.

the offset this more and improvements, year. and unfavorable in million in profit segment coverage point or general expectations margin the at operating a year-over-year These administrative expenses exceeded segment, fixed adjusted in $X selling, impact, than the While cost in mix the reduced this for XX%. increase efficiency created results operational of an resulting

totaling repayments asset The Also million the XX%, million the -- accounts $XXX.X of December or take at $XX our XXXX. first to and revolving totaled a debt XX, payables. million capitalize quarter. and of amounts debt million, $XX.X in end and quarter the due -- gross at basis, a $XXX.X of $X.X our of $XXX.X the our total as represented reported XX, ramp-up the XXXX, million and On term second at warrants to a partially the $XX quarter. of of reflects our a to March our million at at line is capital net the of costs recorded end increase end at offset past million sorry, credit, increase base totaling totaling adjusted $X.X reducing was $XXX.X reported by new our million of addition reduction the on $XX.X XXst Working detachable December we financing from in XXXX, represents OID XXXX slide look first the the Turning were increase on million X, lien in million. and detached an compared capitalization This million. loan stock loan, $XX debt which for preferred for deferred seasonal revenue in

includes be on Our debt credit total availability and our Carl of million the revolving of end hand back it service fund lines in operations and selling to under hand to the and our $XX.X sufficient particular, year I'll prime quarter liquidity over to which wrap-up. the first next at cash expected season. our the is borrowing to to and was summer

Carl Bizon

Thanks, Barry.

in Turning strategic and us confident to efforts in Hard that on the we slide Horizon We have the XX. work provide to is team Global's focused products brands required and our accomplish remain intensely as business industry. a underlying our goals. leadership the position remains

We are well-positioned the upcoming Americas season. for the in peak

been we our a success. support and to consistent and will has to strong continue contributor business Asia-Pacific their

beginning entered demand positive the and prime on experienced capitalize challenging the across are we an that update momentum on outlook our to Europe-Africa will these well-positioned stage the initiatives the and efforts this the on business. in have provides expect setting far to The XXXX. to and the benefit thus improvement achieved progress complexity year remainder and turn believe continued results of around to seasonal solid in progress the But expected efficiencies we driving spring on forward from it. our we the unfold for customers, The there our continued selling on Germany, the operating much facilities season year. at have we is We begin made in primarily due for turnaround initiatives continue basis better business and for I also reduced improvement Romania are winter will continued Europe-Africa, may U.S. long-term. improved France, We provided the based outlook, with Americas production that summer and to harsh Earlier performance of a show the improved

Some such will other customers sales time as regaining aftermarket as reinforcing reputation take among prove initiatives more and ourselves each our we day.

aligned and is team influx with strategic as our we Global one an had new talent -- We've team across leadership complete a of in united we've Horizon had efforts to influx goals. our one goal. are and Our

cash We can our margins, removing our core are debt on operating improving invest pay simplify to focused control business and that efforts focused within those we to on markets geographies. complexity by performance and business. down our and profitability, generating From a practical expanding we by and ultimately in standpoint the things improve means

global the practices prioritizing continue continue in our generation we'll providing We cash team business in shared value well our across debt will business. grow them We benefit by to organization. will and as to training and everything and our invest be customers the our best we that ultimately, as do reduce and

call from will to and Achieving turn I success. with for added covering over steadily us take ultimately, goals for can talent we guide profitable our as we questions drive value Operator? performance, We which our and so reinvigorated the strategic establish analysts. more help deliver experience will operator, the our a will shareholders. stronger base now towards business improved long-term Board a to have move

Operator

floor [Operator from The Our Thank open Nichols first of FBR. for now is your Instructions] comes Josh question questions. you.

Josh Nichols

any off good selling that -- taking is the start quarter, -- thanks had little slow season. did down my for been question. you want it's Yes, for that is where today? to Americas' a prime I know Could at? on see but the to that stands bit updates ready last -- where a worked ask although I the backlog business to

Barry Steele

The Barry. million. now due standing was about $X.X million the whereas backlog right is This order intake past about $XX is total

Josh Nichols

may I going could then increase potential with to tariffs And impact have you type XX% tomorrow did XX%, from want of the that of what help frame to company? to ask the just

Carl Bizon

a of short-term, accelerated in have the could we a it mean our of bit might think Josh couple inventory. demand I see on impacts. an I

quickly. something nature is that that if a of comes that change to you'd think very I expect see through

with stage, terms means cost the and inventory through demand year, will to where those as in simply hand. pays tariffs we the I are But at customers a of Secondly, and those on the what impact last the a ultimately ultimate we tariffs. determine consumer it lead to is pass impact position this think on to something There the we consumer our tariffs of certainly that in them. have have is to it in

Josh Nichols

-- then issue are first Carl. the ask, seeing or any are thanks weather halfway the the through front? demand you And a the quarter, we're was to And wanted impacts from second close then as what quarter in as given far to headwind lingering that you I that seeing

Carl Bizon

in stock ultimately, said, the be We're looking business and quarter. the always I are what's U.S. third numbers, the this who judged foot taking generally the end as of ultimately at economy. will But of traffic we've around think happening at retailers the

weather of of the efforts our to itself extent the that the the a -- of known got end third slow this ultimately wouldn't results start, season So be the end quarter. to has until

Josh Nichols

then a Europe-Africa if provide? this. And I a little the high you on of been point just pain level, know the could has in

year this top-line but on improvement time operating take going it's margin fix. opportunities some a regarding little working to year? this you for level Could expectations to about it, talk bit high or You're for

Carl Bizon

providing know. were the financing the marketplace performed efforts in earlier published result are of as the certainly in There that not as guidance We're we materials year. a you some

this year, certainly the I guidance think expectations of point at we they be give general but providing time. for our in won't outlook

Josh Nichols

What like? I'll and then recently in question, freight could have little you as the a in seems far quantify steel come which seeing last as cost jump you it then help queue. if back some impact and cost, and are of the And bit

Carl Bizon

your I Yeah, comment think is correct.

there has benefit company's some both obviously those cost slight to softening effect think which continues. the I be of been in areas,

Josh Nichols

in Thanks, the queue. I’ll Carl. hop back

Carl Bizon

you, Thank Josh.

Operator

Your question Capital. Matt from ROTH next comes Koranda of

Matt Koranda

Thanks. guys. Hey,

dealers Americas, question start gives the to you season? is up America first the you ramp the points or you've and of gives your the in what distributors looking relatively what the other talking year wanted a data you see that at in out been confidence remainder so confidence are and North steep it that into suggest we're the Just Is the to going heading to essentially, in here? ramp

Barry Steele

but of sort Matt us, called guess is pretty our, million I is backlog indicators I that mentioned. the sizably year just orders on $XX higher for hand last One the of than leading the

better I it's last indicator year. like than this for XX% it time It's what was think important us. an

Carl Bizon

good historically also The rates low. American themselves. I I is low, unemployment interest are is still you feeling when consumer, think about And think U.S. average the about think Matt,

demand. when you split that consumer consider think I demand businesses equally commercial demand between recreational or pretty we and have

about the I a economy given think us. prospects that right remain strong season where for weather to good feels circumstances the our U.S. consumer leads good their

strong seasonal into So things toward we typically that the macroeconomic circumstances a being to we're enough think equal, heading fact I demand. have point all

Matt Koranda

Okay.

generally that QX? in has in toward of I seasonality remarks past, interpreting that your in Given year think at seasonality shift sound waiting quarter? did least more because Am been the correctly, more like Americas this of the I the for revenue the terms in the comments Carl, skewed QX toward could Americas prepared

Carl Bizon

not who feel think I that Matt, and weather has -- impact. certainly are ones that only an the have we had the impact

across of has year, a as sectors south or of the retail result economy. a north. I of of other we start the weather There of the cold feel slower and parts the in up wet the down passports a weather it's think number been

distributors a to we third I end a pull consumers think I at there's out how retailers And before performed of to said -- start been starting quarter lag. be in and think start the of and pull participate the as think from as the determinant and us I have outdoor to retailers the activities ultimately the see coming will we as I business.

Barry Steele

And the I to potential that that outlook. add would

to credit and card able in backs bottom spending quarters add that's to million as savings we about and our we'll We what line. second, the of some $X have on the third fourth mentioned be

Carl Bizon

to we And point, are Barry's waiting think is for I the I the action. take line mean I think bottom not to season

We have that waiting to is have as to spend season company in our year. to to costs done of worked not stepped as we for go SG&A how taken ensure number steps adjust proactively done for we determine everything a that that simply the and and the we're proactive ensure possible our the We've when a year as soon could. we

Matt Koranda

that is on that Is limits? you're that and that color from? on headcount? benefits $X and bit in now its around quantifying Just where from exactly all And Americas, of little essentially to coming more is that's essentially the consolidation clarify the coming just some Okay. that million million $X that a the

Carl Bizon

year it areas. and is of new the last from is additional number a across to efforts It and

Matt Koranda

gears stay no, Shifting one or let's the on to Okay. actually, more. Americas for

pricing pricing the the year. for guess Just of in I pricing had begun of started your quarter, terms think toward I you guys have had quarter in I backend of would you efforts. the said thought mid terms only last

pricing through during full you see benefit the issue? quarter? So a not that price through a put there should to QX? certain little that Can on put are by products clarity was had you yet price we Or components give or on started you the mix this that? And

Carl Bizon

the So, yes is, answer we will.

the effective of early the the some that initiatives to recover we headwinds the quarter, second year. we've extent year see pricing end will taken You last by of to and experienced all that cost this the

Matt based work of and we that periods involve agreements them. We the our the with on stage notice And on That through. that lead means within of customer the customers with in. in how works didn't our on changes. the work there a bounds are the pricing is various who agreements, we're Some depending of that period realities situation trading customer we the commercial have pricing

Matt Koranda

Okay. of you just what's And guess Europe-Africa, the as supply, in an what slide color But and missed All to some driving look right, I then the procurement earlier you this the a on. give in prepared on guys the -- of of with so slide is there? And provided initiatives it terms that's going that I working on have helpful. at you status of localization more have little you're on remarks. wanted more on the the of little status actions may the of color can a toward behind, update

Carl Bizon

Sure. In our capital to raised was with were that of not think to I the additional we to environment the recently And proactively working conducive in an the our us working certainly in up we environment tight remain terms suppliers our we creditors. lead to payment quite ensure to that partnership efficiency improve Europe, when are current. with with plants cost them supply our in working

various in that we improving on efficiency result with benefit cost additional to gains terms of partnering our capital raised, was believe program in efficiency to we will our the a we suppliers once of supplied will think be is I see recently realized as achieved return Europe the So the a the have of plants.

Matt Koranda

Okay.

change that is status in point? raised capital So that to that March at then

Carl Bizon

to move. started certainly It

Barry Steele

Yes.

Matt Koranda

X-L. of one $XXX able covenant talk the extent on that assets end a it. portion have cover certain about the got of my the sort of in the latest of million of And on that status to just guess terms the the $XXX then of million? down the paid you What's sale of to I to last you're Okay

Carl Bizon

commenced work. have We

Jeffries adviser to engaged announced have the that board. an have we as We

We options done been will That's as that are through and working have and decisions will from our that the progresses derive board and at options and board make analysis. actively that the first the appropriate will the opportunity. myself various the available advisers. between clear those communicate board work become And

Matt Koranda

process in not yet. auction necessarily had You entered

the with You're interpret the how likely in board. assessing preliminary of to you what that said? stages options Is

Carl Bizon

advisers. partnership to it's in saying is I'm what early our assessing options guess available and all I we're that the us days, with

Matt Koranda

Thanks. guys. there, it leave I Okay.

Carl Bizon

Thanks, Matt.

Operator

Carl we would turn back you. the call last That Bizon. the for now was over Thank Mr. to have time today. question I

Carl Bizon

call today. for the at Thank in quarter you you. you second end updating the to on everybody a of months. progress joining I few look forward the our Thank

Operator

thank quarter And I to for you a look today. joining us On joining we us Horizon to on our Global, in first like months. of behalf of forward couple would call you conference

Horizon Global (HZN) 9 May 192019 Q1 Earnings call transcript